Theres not any free software that I'm aware of, but you could try Smart DVD creator http://smartdvdcreator.com/?id=sdvdcgg&gclid=CI6__uLDs4wCFRcGEgodnRG7Rg
Alternately I use Ulead DVD Movie Factory http://www.ulead.co.uk/store/dmf/runme.htm#plus
which will not only import AVI but all of the following file types: MPEG-1, MPEG-2, DV AVI, HDV, AVCHD, AVI, DivX, WMV-HD, WMV-SD, DVB-T HD, ASF, DVB-T, DVD-Video, DVD+VR, DVD-VR, DVR-MS, DAT, MPV, QuickTime™ (MOV, QT), Ulead VideoStudio 10 project (VSP)
Plus the facility to add various menu options and NTSC or PAL output. All for under £30.